Dispersed store and online operations can impact profitability

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A global survey has found that running store and online operations separately can impact retailer profitability, as well as hinder a ‘seamless’ shopping experience for consumers. Despite this, 75 per cent of the retail and consumer goods CEO’s surveyed admitted they still run their store and online operations separately.

The research, generated by JDA and PwC, finds that there is a big difference between those who combine store and online operations, and those that don’t. 63 per cent of companies that merged store and online operations expressed confidence in profit growth, compared to 43 per cent with separate processes.

The research found that omni-channel fulfilment is ‘threatening retailers’ profitability’ – with 68 per cent of those surveyed saying their omni-channel costs are increasing.

69 per cent said shipping directly to consumers distribution centre was their highest omni-channel fulfilment cost, followed by processing returns (63 per cent) and shipping to store for pick-up (59 per cent)

JDA says that this data ‘strongly suggests’ that by combining online and store operations, companies can gain a competitive cost advantage.

According to the survey, CEOs are tackling these increased costs by:

– Raising the minimum order value for free home delivery (39 per cent)

– Raising the minimum order value for free Click & Collect services

(31 per cent)

– Increasing the cost for home delivery (29 per cent)

“Fulfilling omni-channel demand profitably remains a huge challenge for retailers,” said Lee Gill, group vice president, global retail strategy at JDA. “As online continues its double digit rate of growth, and takes a greater share of a retailer’s overall sales, the resulting margin erosion from the additional costs associated with fulfilling customer orders, could have an adverse effect on profitability.

“As retailers have embraced offering consumers less costly alternatives to home deliveries, free Click & Collect has grown in popularity.

“To now ask consumers to pay for Click & Collect certainly has its risks. What is clear is that profitability has to be addressed as a matter of priority.”

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